Thursday, March 10, 2016

ECB ready to get out all the stops to support the economy – Les Echos

Against Unemployment, everything has been tried in France, once said in a resigned tone a former president. Mario Draghi, ECB president, has no intention himself, to give up face inflation remains the lowest in the euro zone despite a battery of sophisticated measures already implemented to support it. This Thursday as held a long-awaited meeting of the Board of Governors of the institution guardian of the euro, it is as if everything was needed to boost the economy and prices. Markets are on the lookout, because the promise was given in January from Frankfurt to conduct a “comprehensive review” of the stance of monetary policy in early March if economic conditions so require.

pressures to lower prices

with negative inflation in February, pressures on growth and lower expectations on prices in the euro zone, the stage is set to launch a new catalog synonyms measures further monetary easing. Fears earlier this year about a slowdown in the Chinese economy have spread to Europe and the United States. The risk of producing a very low inflation lasting, far from the target of 2%. Even deflation lurks seeing prices for industrial production to fall by 2.9% year on year.

Economic Forecasts News

To decide to act, the Council of the ECB will be this Thursday in front of the new economic forecasts for the euro area extended to 2018. from there, “all staring Mario Draghi and hope that it will release a white rabbit out of his hat like a magician” Carsten Brzeski smiled, economist at ING Diba. The risk would disappoint the expectations, which has already happened in December.

The “QE” could exceed 2,000 billion

the first lever for action, the deposit rate on cash is unpopular with banks to power to sink into negative territory. -0.3%, It could be increased to 0.4%. A system with liquidity levels could make the measure less penalizing for credit institutions. As for asset purchases, they could be extended beyond March 2017 and to rise by 10 to 15 billion per month, compared to 60 billion monthly pace since March 2015. The current total volume ” QE “then exceed 2,000 billion. Mario Draghi is surprising, if included in the program categories of riskier assets.

Critics say the ECB is near the point where additional measures are more nuisance potential to support the economy. Holger Schmieding, economist at Berenberg, believes that in the current environment of high uncertainty, “monetary policy has lost some of its powers” . Mario Draghi will need all his oratorical talent, this Thursday, to the contrary